GBP/USD touches 31-month high, Pound rally extends

• GBP/USD edged into a fresh multi-year high on Thursday.
• Despite a lack of UK data, GBP continues to grind higher.
• Better-than-expected US data keeps Greenback short pressure elevated.

The GBP/USD currency pair reached a 31-month high of 1.3434 on Thursday, marking a significant milestone in its upward trajectory. This surge was primarily driven by a widespread selloff of the US dollar, buoyed by improved economic indicators that alleviated concerns about a potential economic slowdown.

The data docket remains light on the UK side for the remainder of the week, and Cable traders will be forced to sit on their hands and wait for GBP-centric data due next week, starting with UK Gross Domestic Product (GDP) figure slated for Monday.

The Federal Reserve's recent decision to cut interest rates by 50 basis points raised apprehensions in global markets, with some investors fearing that the drastic move was a response to an impending economic downturn in the US. However, Fed Chair Jerome Powell clarified that the rate cut was a proactive measure aimed at supporting the US labor market, rather than a reactive response to recessionary signals.

Positive data on US Durable Goods Orders and weekly Initial Jobless Claims further reinforced the Fed's position, with both indicators surpassing expectations. The narrative of a "soft landing" for the economy remained intact. The upcoming release of the Personal Consumption Expenditure (PCE) inflation data on Friday will serve as a crucial litmus test for evaluating the impact of the recent rate cut by the Fed.

In August, US Durable Goods Orders stagnated at 0.0% month-on-month, falling short of the previous month's significant growth but still outperforming the projected contraction of 2.6%. Additionally, the Initial Jobless Claims for the week ending September 20 showed a decrease to 218K, beating the anticipated 225K and signaling a decline from the revised figure of 222K in the preceding week.

GBP/USD price forecast

The GBP/USD, also known as Cable, has been steadily reaching multi-year highs, and there are few significant technical obstacles in the way for Pound bulls. However, the strong upward momentum has made GBP/USD vulnerable to a possible downward correction as market dynamics come into play. If there is a significant buildup of selling pressure in the current price region, it could easily push the price below the key support level at 1.3100 and towards the 50-day Exponential Moving Average (EMA) at 1.3076.

GBP/USD daily chart